CBI: Slash tax on electric vehicles as part of green recovery

A new CBI white paper has called on the government to harness the tax system to accelerate net-zero progress by business, including incentives for the purchase of electric vehicles.

Dubbed “Greening the tax system”, the report said businesses will play a crucial role in meeting net-zero by 2050 and new policy frameworks are needed to ensure this can be achieved.

The CBI said regulatory frameworks will be key, considering the pressures on public finances, but fiscal measures, including environmental taxes and tax incentives, can play an important role in driving change.

The CBI is calling for the government to review how the UK tax system could be harnessed to accelerate the reduction of emissions.

It set out a number of principles to guide the government in ‘greening’ the tax system, including targeting polluting behaviour with taxes that can feasibly drive decisions which will result in lower carbon emissions. It said government needs to provide long-term certainty of environmental tax policies to underpin the investment decisions by consumers and businesses and “the use of carrots and sticks by the government should be balanced to drive change”, according the report.

The CBI recommended specifically three key areas:

1. A quicker uptake of zero emission vehicles through a company car tax (BiK); capital allowances; Vehicle Excise Duty; and VAT measures;
2. More energy efficiency, low carbon heat and use of renewables in buildings through the business rates system; capital allowances; structures and buildings allowance (SBA), and VAT on energy saving materials;
3. Innovation in industrial emissions reduction by maximising the deployment of R&D tax credit

The CBI said: “In the long-term, more certainty is needed around transport and emissions taxation. A complete review into the future of fuel duty must be conducted and it is important that long-term certainty is provided by the government on the approach to carbon taxation in the UK.

“Most importantly, climate change policy frameworks must support long-term confidence for investment. We are therefore calling for the government to publish a tax policy roadmap which places achieving net-zero by 2050 at its core”.